Mylan’s 3Q Profit Misses The Street; Cowen Sticks To Hold

Pharma company Mylan’s 3Q GAAP earnings of $0.36 per share declined 2.7% year-over-year and missed the consensus estimates of $1.16. However, its adjusted net earnings grew 12% year-over-year to $679.7 million, driven by higher gross margins. 3Q revenues of $2.97 billion improved marginally from the year-ago quarter but missed analysts’ expectations of $3 billion.

During the 3Q conference call, Mylan (MYL) announced that its merger with Pfizer’s Upjohn medicines business will close on Nov. 16 after which the combined business will officially start operating under the name Viatris and will trading on Nov. 17 on Nasdaq under the ticker symbol “VTRS”.

Mylan’s executive chairman Robert J. Coury said that the company will announce an updat on Viatris’ strategy, including 2021 guidance, at its Investor Day, held in late February or early March 2021. Coury added that “Viatris remains committed to returning capital to shareholders with an expected dividend of at least 25% of free cash flows, based upon GAAP operating cash flow less capital expenditures, beginning after the first full quarter of Viatris’ operations, with the expectation to grow the dividend thereafter.” (See MYL stock analysis on TipRanks).

Following 3Q results, Cowen & Co. analyst Ken Cacciatore maintained a Hold rating on the stock with a price target of $18 (22.9% upside potential). Cacciatore believes that the merger of Mylan and Upjohn “will likely solve nothing” and amounts to “more of the same, just larger.” After seeing the 5-year history of both Mylan and Upjohn, the analyst sees “cause for concern going forward.” The analyst noted that the 3Q results confirm his view about the “the constant downward deterioration in the base businesses.”

Currently, the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 3 Buys and 3 Holds. The average price target of $20.80 implies upside potential of about 42% to current levels. Shares have declined by about 27.1% year-to-date.

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